NDLI: Reliance Life Insurance Co Ltd & Anr. Vs. Rekhaben Nareshbhai Rathod

Content Provider	Supreme Court of India
e-ISSN	30484839
Language	English
Access Restriction	NDLI
Subject Keyword	Deficiency of service Consumer Protection Act Insurance policy 1986 Repudiation of claim
Content Type	Text
Resource Type	Law Judgement
Jurisdiction	India
Act(s) Referred	Insurance Act, 1938 (4 of 1938) Consumer Protection Act, 1986 (68 of 1986)
Case(s) Referred	Referred Case 0 Referred Case 1 Referred Case 2 Referred Case 3 Referred Case 4
Case Type	Appeal
Court	Supreme Court of India
Disposal Nature	Appeal Allowed
Headnote	Consumer Protection Act, 1986: Deficiency of service – Insurance policy – Repudiation of claim – Spouse of the respondent took a policy from insurance company – Two months later he submitted proposal for life insurance policy of the appellant insurance company and in the proposal form, on the query as to whether the proposer was currently insured or had applied for life insurance cover, his answer was in negative – Appellant issued a policy to him – After about a year he died – Appellant repudiated the claim of respondent on the ground of suppression of material fact relating to details of life insurance policies held by her husband – Consumer complaint by respondent – Held: s.45 curtails the common law rights of the insurer after lapse of two years from the date the cover for life insurance was effected – However, the repudiation in the instant case was within a period of two years from the commencement of the insurance cover – The contracts of insurance are governed by the principle of utmost good faith – The duty of mutual fair dealing requires all parties to a contract to be fair and open with each other to create and maintain trust between them – The duty of full disclosure requires that no information of substance or of interest to the insurer is omitted or concealed – Whether or not the insurer would have issued a life insurance cover despite the earlier cover of insurance is a decision which was required to be taken by the insurer after duly considering all relevant facts and circumstances – Prior to undertaking the risk, this information could potentially allow the insurer to question as to why the insured had in such a short span of time obtained two different life insurance policies – Such a fact is sufficient to put the insurer to enquiry – The information which was sought by the insurer was indeed material to its decision as to whether or not to undertake a risk – The proposer was aware of the fact, while making a declaration, that if any statements were untrue or inaccurate or if any matter material to the proposal was not disclosed, the insurer may cancel the contract and forfeit the premium – The failure of the insured to disclose the policy of insurance obtained earlier in the proposal form entitled the insurer to repudiate the claim under the policy – Insurance Regulatory and Development Authority (Protection of Policyholders’ Interests) Regulations 2002 – Regn 2(d.Insurance Act 1932: s.45 – Repudiation of policy of life insurance – Limitation period – Held: s.45 stipulates restrictions upon the insurer calling into question a policy of life insurance after the expiry of two years from the date on which it was effected – Beyond two years, the burden lies on the insurer to establish the inaccuracy or falsity of a statement on a material matter or the suppression of material facts – In addition to this requirement, the insurer has to establish that this non-disclosure or, as the case may be, the submission of inaccurate or false information was fraudulently made and that the policy holder while making it knew of the falsity of the statement or of the suppression of facts which were material to disclose – s.45 curtails the common law rights of the insurer after two years have elapsed since the cover for life insurance was effected. Doctrines/Principles: Doctrine of uberrima fidei – Insurance is governed by the doctrine of uberrima fidei – This postulates that there must be complete good faith on the part of the insured – The relationship between an insurer and the insured is recognized as one where mutual obligations of trust and good faith are paramount – In a contract of insurance, the insured can be expected to have information of which she/he has knowledge – This justifies a duty of good faith, leading to a positive duty of disclosure – Insurance. Insurance Regulatory and Development Authority (Protection of Policyholders’ Interests) Regulations 2002: Regn 2(d) – Proposal form – Held: Regn 2(d) specifically defines the expression “proposal form” as a form which is filled by a proposer for insurance to furnish all material information required by the insurer in respect of a risk – The purpose of the disclosure is to enable the insurer to decide whether to accept or decline to undertake a risk – The disclosures are also intended to enable the insurer, in the event that the risk is accepted, to determine the rates, terms and conditions on which a cover is to be granted. Insurance Regulatory and Development Authority (Protection of Policyholders’ Interests) Regulations 2002: Regn 2(d), Explanation – Furnishing of all material information in the proposal form – Meaning of expression ‘Material’ – Held: The explanation defines the expression “material” to mean and include “all important essential and relevant information” for underwriting the risk to be covered by the insurer – The expression “material” in the context of an insurance policy can be defined as any contingency or event that may have an impact upon the risk appetite or willingness of the insurer to provide insurance cover – In a contract of insurance, any fact which would influence the mind of a prudent insurer in deciding whether to accept or not accept the risk is a material fact – If the proposer has knowledge of such fact, she or he is obliged to disclose it particularly while answering questions in the proposal form. Insurance Regulatory and Development Authority (Protection of Policyholders’ Interests) Regulations 2002: Regn 2(d) – Consequence of inaccurate answer in the proposal form – Held: An inaccurate answer will entitle the insurer to repudiate because there is a presumption that information sought in the proposal form is material for the purpose of entering into a contract of insurance – In a proposal form the applicant declares that she/he warrants truth – The contractual duty so imposed is such that any suppression, untruth or inaccuracy in the statement in the proposal form will be considered as a breach of the duty of good faith and will render the policy voidable by the insurer – The finding of a material misrepresentation or concealment in insurance has a significant effect upon both the insured and the insurer in the event of a dispute – In the instant case, the insurer had sought information with respect to previous insurance policies obtained by the insured – The disclosure of the earlier cover was material to an assessment of the risk which was being undertaken by the insurer – Prior to undertaking the risk, this information could potentially allow the insurer to question as to why the insured had in such a short span of time obtained two different life insurance policies – Such a fact was sufficient to put the insurer to enquiry – The information which was sought by the insurer was indeed material to its decision as to whether or not to undertake a risk. Insurance: Plea of ignorance of contents of proposal form – Held: Proposer is not absolved of the consequence of appending his signatures to the proposal on the submission that he was unaware of the contents of the form that he was required to fill up – In the instant case, the proposer duly appended his signature to the proposal form and the grant of the insurance cover was on the basis of the statements contained in the proposal form – Barely two months before the contract of insurance was entered into with the appellant, the insured had obtained another insurance cover for his life in the sum of Rs 11 lakhs – The failure of the insured to disclose the policy of insurance obtained earlier in the proposal form entitled the insurer to repudiate the claim under the policy – The argument of the respondent that the signatures of the assured on the form were taken without explaining the details is not acceptable
Judge	Hon'ble Dr. Justice D.Y. Chandrachud
Neutral Citation	2019 INSC 565
Petitioner	Reliance Life Insurance Co Ltd & Anr.
Respondent	Rekhaben Nareshbhai Rathod
SCR	[2019] 6 S.C.R. 733
Judgement Date	2019-04-24
Case Number	4261

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